Writing about random topics

Another trade, another loss but I feel okay with it

Today, I experienced yet another loss in trading. I had a couple of small victories but interrupted that winning streak with yet another couple of big losers.

Yet, I feel alright with this one. The reason is that I feel like I did everything in my power to trade correctly. I couldn’t foresee the market’s huge drop today and therefore, taking a loss when something like this happens is acceptable:

I bought a call option in Google last Friday. Google had traded down six sessions in a row which almost never happens. I bought a call option betting that it would go up in the near term since even in bear markets, stocks rally sharply. I bet on a reaction to the upside since Google had done it twice since this correction began.

I missed out on Apple’s collapse today. I had Apple hand me my posterior in my second last trade in it (I made $40 this past week – hooray!). But Apple had a good correction and then paused… and my paranoia said “Get out!” I did but I thought that it might collapse. But given how long Apple had been able to buck the market trend I couldn’t take the risk.

My general market indicators were not telling me that there were extremes in either direction. The percentage of stocks trading above their 40-day moving average was 40%. Readings below 20 and above 90 are extreme and are reliable. 40 is ambiguous. Looking on that and seeing it rally, I would have bet on an up movement, which is why I was long Google.

The Bulkowski Indicator, which I had been using, had been generating a lot of whipsaws. I decided to ignore it because it wasn’t giving me anything useful and my reliance upon it cost me in Apple and APKT.

Seeing all of this, I think that my analysis was correct. I couldn’t have foreseen this huge drop today and therefore all I can control is my entries and exits. Yes, I lost money. But I followed my plan.

And now the one thing that gives me hope is that the Nasdaq has gapped down, and there is an old saying – All gaps must be filled. This is true nearly 100% of the time, and Google is still oversold. I figure I can buy some call options again and recover some of my losses. I see an opportunity here for a quick snapback.